APARTMENT towers rising up to 30 storeys next to the Central Market should be considered in redeveloping the Market Arcade, Lord Mayor Stephen Yarwood says.

Mr Yarwood will tonight push for the City Council to start work immediately on a plan for the market precinct.

Victoria Square Shopping Centre Pty Ltd has a lease on the council-owned arcade, which includes the Coles supermarket on Grote St, until 2018.

"The day after the lease expires I would want to see work start on that site, and that means starting (planning) now," Mr Yarwood said.

"Obviously it's not my job to second guess what the master plan might be but there's potential for two 20 to 30-storey buildings on that site."

Apartments and an expansion of the Hilton or another hotel were options, he said.

"It's a fantastic opportunity for a really sophisticated mixed-use development.

"There would be a lot of people interested in living above the Central Market (Arcade)."

He said the arcade, which connects the Central Market to Victoria Square and has 70 specialty shops, could be rebuilt "from scratch" but any redevelopment should maintain ground floor retail use and a supermarket.

"I would be absolutely shocked if the retail component wasn't maintained and enhanced.

"We would want to see any development bring more people into the precinct."

Building on top of the Central Market itself was not possible because it was heritage protected and would require significant rebuilding to support structures above, he said.

Mr Yarwood said the council would need to consider whether it would develop the site itself or how it might work with private partners.

He will push for the planning proposal at a council committee tonight (Tuesday, August 6).

A written staff response said trader groups and residents would need to be consulted about creating a master plan.

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